The Government is learnt to have dropped its plan to open up FDI in multi-brand retail thereby derailing the Indian foray of global retail players such as Wal-Mart, Tesco and Carrefour.
Mr Thomas Varghese, Chairman, CII's National Committee on Retail, told Business Line that according to the latest developments in the Government, “the matter has been put on ice,” adding that it's unlikely to “happen.” The Indian retail sector is estimated to be worth about $500 billion.
Foreign direct investment is not permitted in multi-brand retail in India. However, single-brand outlets are allowed up to 51 per cent foreign investment. In wholesale, or ‘cash and carry', trade, up to 100 per cent FDI is allowed.
It may be recalled that at a recent luxury brands summit organised by the CII in Delhi, the Minister of Commerce and Industry, Mr Anand Sharma, made an announcement that the 51 per cent FDI cap on single brand outlets would be hiked.
Industry sources termed it as a step to appease retail trade as the Government had more or less made up its mind not to open multi-brand FDI.
An official in the Ministry of Consumer Affairs, Food and Public Distribution said that after the Committee of Secretaries gave its recommendation on opening up of multi-brand retail, it was up to Department of Industrial Policies and Promotion (DIPP) to circulate the note to the Cabinet and “they have not heard anything from there”.
On Thursday, the Chairman of the Economic Advisory Council to the Prime Minister (PMEAC), Dr C. Rangarajan, turned down the view of the Inter-Ministerial Group (IMG) on opening up multi-brand retail. The IMG had advocated opening up of FDI in multi-brand retail to contain inflation, but Dr Rangarajan questioned as to “how many aspirant multinational companies will be interested in setting up contact point for the farmers”.
With the Government dragging its feet over the issue for about seven years now, Mr Arvind Singhal, Chairman of consulting firm Technopak Advisors, said he “would be surprised if FDI opens up now”.
The Government should have an articulated view on opening up FDI whether it is single-brand or multi-brand retail, he felt.
Mr Varghese, who is the CEO of Aditya Birla Retail that operates the ‘More' chain of retail supermarkets and hypermarkets, said that industry was now looking forward to FII investments in the sector.
“We are okay with a foreign institution investing in our company because large chains like ours don't need a name. We can outperform foreign retail brands.”